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Putting Stock in Actuaries

Putting Stock in Actuaries

by Sam Phillips

Todd Bault, senior research analyst–Institutional Research, Sanford C. Bernstein & Company and a Fellow of the Casualty Actuarial Society, was recently named the top equities analyst in the non-life insurance sector by Institutional Investor as part of the magazine's 2004 All-America Research Team, according to a press release from Casualty Actuarial Society. As part of its ongoing quest to highlight the careers of actuaries who have moved into non-traditional roles, thereby opening new employment avenues for the actuary profession, The Actuary asked Bault to answer a few questions about his career.

What is your employment background?

I joined the St. Paul Companies in 1988 after graduate school in Applied Mathematics. I worked there for nearly 10 years, holding four different jobs. By the time I left, I had received a comprehensive "jack of all trades" training–pricing and reserving, insurance and reinsurance, profitability and risk measurement, acquisitions and strategic planning. This served me well for my next job as chief actuary of TIG Re and later Odyssey Re (I survived an acquisition). I worked closely with the CEO (who also left St. Paul Companies) and was involved in most company operations in some way. This very broad insurance and reinsurance experience turned out to be exactly what Bernstein was looking for in an insurance equity analyst.

How long have you been employed by Sanford C. Bernstein and how did that come about?

I've worked at Bernstein for five years. It came about by luck, frankly. While doing M&A work at St. Paul, it had occurred to me that I might have the talent to be an investment banker. Bernstein's recruiter got my name from someone in the industry while I was still at Odyssey Re.

What inspired you to enter the employment field you are currently in?

Perhaps a better question to ask is what inspired me to take Bernstein's offer. At the time, people told me that Bernstein was one of the best research houses on Wall Street. They did only research–no investment banking–and were known to hire people out of industry instead of recruiting out of business school. During the interview, it became clear that Bernstein's research approach looked like strategic planning, which made a lot of sense to me and seemed to fit my background well. Now that I understand Wall Street better, I realize that Bernstein is even more different from other research firms than I initially thought. Bernstein's research is literally like nothing else on Wall Street in its depth and impartiality, and analysts are given great freedom to proceed as they see fit.

What are the major differences in the position you have now compared to a traditional actuarial role?

Interestingly, I am trying to use actuarial science as much as possible. My job is to help institutional investors pick stocks, but I think that the tools actuaries use are well suited for this task. Given that I cover the insurance industry, the overlap is even greater, but I think my actuarial background would be valuable in any sector. The biggest difference is the client contact. A large amount of my time is spent talking to and visiting clients. This is a key insight I hope I can give to other actuaries. Too often, I have seen actuaries do great work that goes unrewarded, simply because the actuaries are not effective at presenting their results. Some of this can be taught, but often times actuaries don't seem to care about communicating their ideas. My clients are very smart people, but they don't know nearly as much about insurance as I do. I cannot simply assume that I can tell them what to do and they will do it. I have to convince them that I am right, in language they understand.

How did you prepare yourself for the new challenges you face in your current position?

The actuarial background and my career path are exactly what Bernstein wanted. It likely would have been harder to get into another Wall Street firm given their preference for MBAs.

What are some of your greatest career-related accomplishments?

Obviously the recognition of being ranked #1 by Institutional Investor is nice. But what I like the best, I think, is the reaction of the companies that I cover. I try to be very impartial in my research. I do not "love" or "hate" companies, I do not take things personally. I probably speak to company managements less than my competitors because I don't need to have the complexities of the industry explained to me. I point out the good with the bad. I offer constructive criticism, particularly about bad disclosure (as an actuary, the data is never good enough). Yet it seems that the companies I cover very much like the research we do because it sounds like the industry they know. You would be surprised how often stock analysts in all sectors make claims about their covered industry that are questionable if not flat out wrong. I have had company managements ask for reprints of my research to give to their boards to help them learn about the industry. I like that a lot.

What has been the secret to your success?

There was a point in my career when management stopped saying "you're really smart" and started saying "you really have a lot of energy." Once that happened, whole new opportunities opened up. I recognize that actuaries tend to be an introverted lot overall, but unfortunately extroverts run everything. Hard as it can be, actuaries really need to open up and interact more with colleagues.

What career-enhancing advice would you give to other actuaries?

The comment on client communication earlier is a specific example of a general issue I have seen with actuaries. Most actuaries have a certain degree of intellectual arrogance, which manifests itself as "who cares if no one else thinks I'm right–I know I am." This will never work if you want to keep advancing and get into jobs where you need to persuade people.

What are your career goals for the future?

This job has opened up some new paths. I certainly could remain an analyst, and staying at Bernstein is very appealing right now. I could think about covering a different sector. I could be an investment banker or even a money manager at some point. If I were to go back into the insurance industry, I would probably be interested in something like the CFO, or perhaps even CEO someday.

What is your best "on the job" memory?

Tough question. I think I would group a whole class of moments together, when you really connect with a client who had a completely different view of your thesis on a topic, and you sway them to your point of view. Often times, actuaries don't get to see the impact of their decisions. In my job, I know the impact–the client buys or sells the stock.

If you had to do it all over again, would you choose the same career path?

Another tough question. I have a hard time seeing how things could have turned out better. The only possibility would have been to go to business school right away and try to get to Wall Street sooner. Had I done that, though, I never would have gotten the Bernstein job. So, I think I made the right decision.

Sam Phillips is associate editor for the Society of Actuaries.